Australia: Good Faith Bargaining Insights From The USA

Last Updated: 7 October 2009

Joseph Turzi, a partner with DLA Piper in the United States has been practising labour law for approximately 20 years. With the introduction of good faith bargaining to Australia through the Fair Work Act we spoke to Joe about the way in which good faith bargaining operates in the United States law to provide guidance as to what it might mean in Australia.

A point that Joe emphasised in our discussions was that under US labour law employers are permitted to bargain hard and the obligation of bargaining good faith recognises that hard bargaining can be good faith bargaining. A party can come to the table with a position and as long as the party is willing to explain it and discuss it, taking a hard position on that proposal is lawful.

It is this critical area that has been subject to discussion in Australia and the FW Act makes it plain that the good faith bargaining requirements do not require concessions. However, in order to bargain hard you need to know where the line is so you do not cross from hard bargaining into bad faith bargaining.

DLA Phillips Fox - The concept of bargaining good faith suggests a subjective view of what might be for one person legitimate robust negotiation and for another bad faith bargaining. Has the US National Labour Relations Board (equivalent of our Fair Work Australia) been challenged in developing general principles in the area of good faith bargaining?

I think the question's a good summary actually of the difficulty. Ultimately it is a subjective view. What one person may see as hard bargaining of a legitimately held position, another person may just see as a refusal to move on a reasonable counter proposal or an attempt to force employees out on strike. So, yes, where you're coming from in terms of your point of view may be where you end up in terms of how you interpret the actions of the other party.

The USA NLR Board has been fairly successful in developing some principles. It's really in their application that the principles become complicated as to what is 'surface bargaining', for example, generally going through the motions of bargaining without any real desire to reach agreement. However, because, like many of these good faith bargaining issues, that is more about intent than substance and in fact, because substance is not an issue under US labour law, it becomes very difficult to apply a principle.

DLA Phillips Fox - How important is it to look at the totality of the conduct rather than a single behaviour in determining what is and is not good faith bargaining?

Generally, it's always the totality of the conduct that determines good or bad faith. There are, however, certain hallmark violations that a single instance of which can result in a finding of bad faith. For example, part of the obligation of bargaining good faith is the requirement that information relevant to bargaining is provided. If you simply refuse to provide information that would be a violation in and of itself of the duty to bargain in good faith. If you make yourself unavailable for bargaining, that itself will be a violation of the duty to bargain in good faith. However, other than the area of information request, it's rather rare that any single event would result in a finding of good or bad faith because both parties are sophisticated enough and have been dealing with the scheme for many years and that they avoid hallmark violations.

One that often comes up and that has developed under US labour law is that sometimes an inexperienced practitioner or employer may make the mistake, is a claim of financial inability. In bargaining an employer may wish to state that they do not consent to the wage demand, however they express this rejection by saying the payments a union is requesting may bankrupt or ruin the firm. If you have a statement of that nature which relates to the ability to pay, the union then is entitled to ask for information from the employer to prove that the employer cannot afford the union's request. This is generally something that would require an opening of the books which most companies treat as confidential or otherwise protected information or are reluctant to do so. However, once having made the affordability statement under US labour law you have an obligation to do so. So, in short where the employer makes an affordability claim and then refuses to open its books or provide evidence or information to prove its claim, that would be a violation of the duty to bargain in good faith.

Ultimately, the Board will not only look at the behaviour at the table but there is also some enquiry into the positions adopted at the table. The most significant of these is the standard of whether the proposals made on the table were so patently unreasonable that they can be said to have been designed to frustrate an agreement. So, there is some substance of review at this stage. Of course, once again, we're in an area of subjective analysis of what becomes extreme behaviour can change depending on the view you take of it.

DLA Phillips Fox - A concern for employers is that the rules in Australia that bargaining must be neither unfair nor capricious lend themselves to vague rulings and subjectivity. Has this difficulty in establishing objective criteria been an issue for you in the United States?

The simple answer is, yes. We're talking motive or intent and it is necessarily subjective, and therefore, it is virtually impossible to be certain at any point whether you were engaged in good faith or bad faith bargaining. We have a long history of decisional law which helps create guide posts, but, even then, on more difficult issues, it becomes very difficult to know where the lines are.

DLA Phillips Fox - What is your experience in applying good faith bargaining in a robust industrial negotiation?

If, by robust, we mean a difficult or challenging negotiation, the experience is, the greater the challenge of the negotiations, the more difficult it is to bargain in good faith, and by that I don't mean that the parties can't bargain in good faith, but that understanding what you need to do to bargain in good faith becomes more complicated, primarily because the parties will be looking to what advantage good faith issues produce, what leverage can be gained by preventing, or making it appear that the other side is not engaged in good faith bargaining. So, if a negotiation is difficult then a smart move for a union is to present the types of demands, whether they be information requests or bargaining demands or behaviour at the table, that would make the employer appear to have engaged in bad faith bargaining. So, what happens in a robust or challenging industrial setting is there is a lot more jockeying at the table over the issue of good and bad faith, and the substance of negotiation therefore becomes a bit more difficult. That's why a great deal of negotiations take place in 'off the record' sidebars where the parties can discuss issues more freely without concern for the good or bad faith implications that would be raised by an 'on the record' discussion at the table.

DLA Phillips Fox - An important aspect of the duty to bargain in good faith is the requirement on the parties to disclose information. What information do unions in the US typically (seek) from employers?

A union generally seeks information intrinsic to the employee/employer relationship. That type of information is considered presumptively relevant under a very broad relevant standard, and so, anything dealing with wages, benefit, terms and conditions of employment such as employee policies, will all be relevant and the Board will require it to be turned over if requested. The interesting part of information requests is when they go beyond what is presumptively relevant. There, the union has an obligation to show relevance, but again, the standard is very broad. So, what happens when you go beyond the traditional terms, conditions, wages, benefits is that unions will ask for a great deal of information, some of which it knows the employer may not want to disclose for confidentiality reasons or competitive reasons or simply because it might create some problems in the workplace, and that puts the employer in a position of either turning the information over or having engaged potentially in one of the hallmark violations, not providing information.

Unions will often make information requests for the purpose of setting up this problem for an employer. Just by way of example, one place that is often comes up is if a company has affiliated operations and/or joint venture partners. In the United States, there are principles of relatedness or scope that can make those other operations subject to bargaining with the union. The union may serve a host of information requests designed to allow it to prove the connection sufficiently to demand bargaining beyond the immediate employer.

The International Brotherhood of Electrical Workers has a rather standard request for these related employer issues that numbers approximately 144 questions, getting into all kinds of details on the operation. So, there could be any number of requests that the unions raise beyond simply the immediate terms and conditions, and they could be raised for issues of gaining a tactical advantage by putting the employer in a position of saying, no, and creating a hallmark violation.

With respect to information that can be usefully sought from a union, for most employers it is rather limited. Generally, what employers would like to see are other collective bargaining agreements so you can see what other companies who have negotiated with the union have agreed to, but the Board takes the position that those are not relevant, absent some specific showing in the existing negotiations. But, with respect to most workplace issues, the employer has more information at its disposal than the union does on the issues most relevant to the bargaining.

Again, it may be a bit countercultural to some employers who naturally want to control their internal information and protect it. However, in the context of bargaining, the damage of doing that under the good faith analysis may be more than the benefit of retaining the information.

DLA Phillips Fox - What are typical examples the NLRB would consider unfair bargaining or unfair labour practice in the context of collective bargaining with the union on the part of an employer and a union?

Since the obligations are very similar, it's a broad good faith duty, the behaviours that could violate the duty are very similar on both sides as a technical matter. As a practical matter, there are some distinctions, but in general the type of activities that could be considered a refusal to bargain in good faith, refusing to supply information, refusing to meet at all. So, if you make yourself unavailable entirely, or make it very difficult to schedule meetings, that would be bad faith. Trying to dictate who the negotiators will be for each side - the union can't dictate to management who its representatives will be, nor can management dictate to the union who its representatives will be. Trying to dictate ground rules, or to bargain hard over ground rules for a negotiation, for example, what communications will take place outside the negotiating room. So, those issues cannot be bargained to impasse. They certainly can be discussed but you can't take a stand on those.

Trying to bargain directly with the employees rather than through the employees' representative, through the union, discouraging support for the union, or trying to undermine the union or its position during bargaining, making a unilateral change in terms and conditions of employment. And here is a significant difference between the obligations of management and the union during bargaining. Once a contract (EBA) has expired, under US labour law management must maintain the status quo as represented by that contract until it reaches a new agreement with the union or a good faith impasse. However, there is no statutory obligation on the union to refrain from any economic pressure, even during the term of a contract, so, during bargaining, a union is free to engage in economic pressures. For example, the union can strike at any point during bargaining. The union's even privileged to engage in what activity or certain activity that might not be protected under labour law. In other words, labour law views it as illegitimate activity, and therefore, employees who engage in that activity do not receive the protection of labour law for their actions and may be disciplined or terminated. But even that activity which not protected may be lawful and is lawful in terms of the good faith bargaining obligation. It will not be evidence of bad faith.

And, what is referred to as surface bargaining, which is going through the motions without any real intent of entering into an agreement, so you follow the process but other evidence indicates that you never have any desire or intent to enter into an agreement with the union. So, those are the types of activities we have many decades of law taking this into great detail. There are many others, but these are the most significant violations of the duty to bargain in good faith.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

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